Unions and firm innovation in China: Synergy or strife?

The monopoly face of unions suggests that the rent-seeking activities of unions discourage research and development investment and that the collective bargaining rules may restrict management flexibility, thus deterring innovations. On the other hand, the arrival of unions in the workplace may shock the management into adopting more systematic rather than ad hoc management practices and that such innovative workplace practices may enhance an organization s ability to introduce new products and/or new processes. Further, the voice face of unions argues that the independent questioning of the management deliberations by the unions can also lead to better, more creative and, hence, more productive solutions. This paper investigates the link between unions and firm innovations in China. Different from their counterparts in advanced economies, Chinese unions are found to encourage firm innovations and R D investment.